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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAMIT KOCHAR
सुनवाई क" तार"ख /Date of Hearing : 01-03-2017 घोषणा क" तार"ख /Date of Pronouncement : 14-03-2017 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being 7th October, 2013 passed by learned Commissioner of Income Tax (Appeals)- 39, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2008-09, the appellate proceedings before learned CIT(A) arising from the assessment order dated 4th May, 2012 passed by learned Assessing Officer (Hereinafter called “ the AO” ) u/s 154 of Income-tax Act,1961 (Hereinafter called “the Act”).
ITA 7591/Mum/2013 2
The grounds of appeal raised by the assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-
1) The Learned CIT(A) 39 both on facts and in law has erred in confirming the action of the Assessing Officer in passing an order u/s. 154 of the I. T. Act, 1961, without properly appreciating the facts of the case. 2) The appellant craves leave to add, amend, alter and or vary any of the grounds at the time or before the hearing of this appeal. 3) The appellant therefore prays that order passed by the Assessing Officer u/s. 154 may please be held as illegal or alternatively same may be set-a-side to the file of Assessing Officer to consider the issue a fresh after providing reasonable opportunity of being heard to the appellant.
3. The brief facts of the case are that assessment u/ s. 143(3) of 1961 Act was completed on 24the December, 2010 assessing the total income of the assessee at Rs. 42,430/- as against returned income of Rs. 42,430/-. On verification of records, it was seen by the AO from Tax Audit Report in Form No. 3CD that assessee had not added back disallowed expenditure of Rs. 1,18,26,880/ - (Sr. No. 17(f) - Interest on escrow) and Rs. 1,13,718/- (Sr. No. 17(B) - amount inadmissible under section 40(A)(3) of 1961 Act in computation of total income. Thus as per AO , it resulted in understatement of income by Rs. 1,19,40,598/-. Notice u/s. 154 of the 1961 Act dated 19th March, 2012 was issued to the assessee asking for reply with respect to said mistakes in the assessment order, however as per the AO , the assessee did not submit any reply. Since the mistake was apparent from record, the A.O. computed revised total income at Rs. 1,19,83,028/- as against returned income of Rs. 42,430/- , vide rectification order dated 04-05-2012 passed by the AO u/s. 154 of 1961 Act .
4. Aggrieved by rectification order dated 04-05-2012 passed by AO u/s 154 of 1961 Act, the assessee carried the matter before the ld. CIT(A) wherein it was ITA 7591/Mum/2013 3 contended that the assessee had filed detailed reply before AO which was not considered by AO . On being asked to submit proof of submitting detailed reply , the assessee could not produce the same before learned CIT(A). It was also submitted by the assessee before learned CIT(A) that sufficient opportunity was not granted to the assessee by the A.O. and, hence, one more opportunity may be granted through remand proceedings. It was submitted that while preparing Form 3CD tax-audit report, certain errors had crept in which was committed by tax-auditor. It was submitted that instead of mentioning interest paid to Canara Bank on secured loan, the same has been typed as "interest on Escrow account Rs. 1,18,26,880 / - in Column 17(f)", being "amounts inadmissible under s. 40(a)". In support, the assessee produced photocopy of bank statement of the relevant period showing that interest has been debited. As regards disallowance of Rs. 1,13,718/- u/s. 40(A)(3) of the Act, it was submitted that the payment was made for acquiring furniture and fixtures and was not an expenditure of revenue nature and, hence, the said provision was not applicable.
The ld. CIT(A) after considering submissions of the assessee held that tax- audit report is certified and signed by the auditors which was based on the audited accounts , which report clearly stated that the amounts as mentioned were inadmissible and not having added back the same in the computation of income which certainly constitutes a mistake apparent from record. As such, the A.O. was not at all in fault having rectified the assessment order u/s 154 of 1961 Act as it is a mistake apparent from records. The ld. CIT(A) accordingly confirmed the rectification order dated 04-05-2012 of the A.O. passed u/s. 154 of 1961 Act , vide appellate order dated 07-10-2013.
Aggrieved by the appellate order dated 07-10-2013 passed by ld. CIT(A), the assessee is in appeal before the tribunal.
ITA 7591/Mum/2013 4
None appeared on behalf of the assessee, hence, we proceed to dispose of the appeal on merits after hearing ld. D.R. and after considering material available on record including orders of the authorities below.
The ld. D.R. relied on the order of the ld. CIT(A) and submitted that the assessee’s contention regarding granting one more opportunity was not given to the assessee by learned CIT(A) by remanding the matter to AO for seeking remand report , the matter can be set aside to the file of the A.O. for de-novo adjudication of the issues on merits.
We have heard the learned D.R. and perused the material available on record. We have observed that the A.O. invoked provisions of section 154 of the 1961 Act vide notice dated 19th March, 2012 to correct the mistake apparent from record in the assessment order dated 24.12.2010 passed u/s 143(3) of the Act , wherein two additions had been made u/s 40(a) and 40A(3) of the Act aggregating to Rs. 1,19,40,598/- vide rectification order dated 04- 05-2012 passed u/s 154 of 1961 Act by the AO which was confirmed by learned CIT(A) . The A.O. as well as ld. CIT(A) while passing orders have relied upon the tax audit report issued by qualified chartered accountant . The assessee has contended that while preparing the Form 3CD audit report, certain errors had crept in the audit report committed by chartered accountant. The assessee has claimed that reply was duly filed before the AO in rectification proceedings u/s 154 of 1961 Act, which was brushed aside and not considered by AO before passing rectification orders dated 04-05- 2012 u/s 154 of 1961 Act. The assessee also produced detailed reply on merits before the learned CIT(A) in the appellate proceedings and requested for remanding the matter before the AO for consideration of its reply on merits, which again was not considered by learned CIT(A) on merits and order of the AO was merely confirmed. The taxes can only be collected as per authority of law and if any mistake has crept in the tax-audit report and the ITA 7591/Mum/2013 5 assessee comes forward with a bonafide reply, it is the bounden duty of the authorities to consider such reply on merits so that correct taxes can be collected from assessee. It cannot be simply brushed aside at threshold itself without considering the same on merits. In our considered view, the issues under this appeal need to be set aside and restored to the file of the A.O. for de novo determination of the issues on merits after considering the explanations and evidences submitted by the assessee on merits . Accordingly we set aside this matter back to the file of the A.O. for de-novo determination of the issues on merits . The assessee is directed to appear before A.O. and produce all cogent evidences and explanations in support of its contentions in its defense. The A.O. shall grant opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law before de-novo determination of the issues on merits.We order accordingly.
In the result, appeal filed by the assessee in 2008-09 is allowed for statistical purpose.